If you’re ignoring your spiraling debts, you’re not putting off the problem – you’re putting off the solution to the problem. Even if you’re facing significant financial challenges, there are number of steps you can take before filing for bankruptcy.

Here we talk you through some measures you can take to manage your debts before things get out of hand.

1.   Consolidate or refinance your debts

One of the many difficult things about periods of financial hardship is just how messy they can become. Juggling numerous debts at once can feel confusing and overwhelming, and makes it more likely that you’ll miss payments. Provided you’re not yet at a crisis point, you might consider consolidating your debts into one place. Simplifying your loans may make it easier to move forward and, if done properly, could reduce the amount of interest you’re paying.

But be careful – as with everything debt related, there are plenty of sharks lurking. Before signing a debt refinancing or consolidation agreement it’s best to speak to a trusted advisor like a bankruptcy consultant.

2.   Sell some assets

Parting with your valuables can be painful. But appraising your assets and selling what you don’t need can be a great way to free up your cash flow and take control of debts. Consider the following options:

• Selling old jewellery or electronics you don’t use or need
• Downgrading your car
• Cancelling subscription services
• Selling electronics

You’d be surprised at how much money can be made and saved with a little conscious thought. And if you’re reluctant to let go of that luxury item, remember, it’s temporary. The priority right now is getting on top of your debts.

3.   Communicate with your creditors

Although it can feel like it, your creditors don’t want to drive you to bankruptcy. They just want you to repay your debts – if you can do so while remaining solvent, it’s in their interest as well as well as yours to communicate that.

It may be worth getting in touch with your creditors to let them know you’re facing financial difficulty. You may be able to renegotiate the terms of your debt, including:

• The time you have to pay
• Your payment arrangement
• Your interest rate

Some people avoid approaching their creditors out of embarrassment. Just remember that financial misfortune can happen to anyone, and that most lenders have protocols in place for exactly this scenario.

Note that negotiations such as these are different from a formal debt agreement. Before you have this conversation, make sure you seek advice from an insolvency consultant who can help you with what to say and expect. The earlier you address your debt situation, the better. Chat with one of our friendly professionals today.

* The information on this page should not be taken as legal advice.